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 Ratepayers’ R261m Cup stadium ‘hangover’

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PosOnderwerp: Ratepayers’ R261m Cup stadium ‘hangover’   Wed Jul 14, 2010 9:31 pm



2010/07/14
Brian Hayward haywardb@avusa.co.za



Image of

COUNTING THE COST ... Port Elizabeth’s World Cup stadium.



NELSON Mandela Bay residents are having to foot a R261-million shortfall in funds for the plush World Cup stadium in North End, the payment of which has seen new infrastructure plans for the city downscaled or put on hold because there is no money.

While the World Cup has come to an end, residents will have to endure a tournament “hangover” by paying higher rates – partly to cover the city’s unanticipated higher contribution towards construction costs – as well as cough up as much as R20-million a year to cover the operating costs of the landmark stadium until it becomes self-sustainable.

The city has so far spent R336-million on the R2.1-billion stadium, up from original estimates of R95-million back when it was thought to be costing R895-million.

But even the sustainability of the stadium has been thrown into question following the announcement that the city’s leading soccer side, Bay United, has been sold to a businessman in Limpopo who will relocate the team to his province. This has been confirmed by sources within Bay United.

Stadium operator Access Management’s spokesman Buli Ngomane said: “Our business plan is built on two anchor tenants at the stadium – a soccer team and a rugby team. This has always been part of the plan because this is a multipurpose stadium.

“It’s a challenge at the moment because we don’t yet know the fate of Bay United, but our doors are open.”

The rugby team to be housed at the stadium is Eastern Province, although the region is still lacking a Super rugby franchise which has secured the viability of stadiums in other provinces.

In the meantime, hard-pressed ratepayers have been hit by higher than anticipated rates increases since the beginning of the month, with an 11% hike in property rates – instead of the 9% initially mooted – a water tariff increase of 12%, as opposed to 11%, and sanitation and refuse hikes of 11%, not the 10% initially announced.

Electricity prices rose the most with a hike of 22%, instead of the originally announced 18%.

Along with other purpose-built World Cup stadiums around the country – including the Cape Town Stadium and Soccer City in Johannesburg – construction costs for the Nelson Mandela Bay Stadium spiralled substantially from the June 2006 estimated cost of R711-million, to R1.5-billion in May 2008, and finally the completed cost of R2.065-billion.

While it was informally agreed upon from the outset the city would cover 10% of construction costs, provincial government 20% and national Treasury 70%, the country’s recession and the worldwide economic meltdown saw national and provincial purse strings tightened, despite escalating building costs.

Municipal spokesman Kupido Baron denied there was any formal agreement regarding the funding allocation, but said the city was trying to recoup the shortfall.

“If shortfalls are calculated based on this (10-20-70) split, then the national government still owes the city R70.5-million and provincial government R191- million. With regard to the recovery of these funds from both government and province, communication protocols (to recoup the funds) are being observed and adhered to,” Baron said.

Despite this, national Treasury spokesman Jabulani Sikhakhane said: “There will be no more funding from national Treasury (which has contributed R1.375-billion, or 66.5% of the stadium’s cost).”

Provincial Treasury had not responded to questions at the time of going to press last night.

Well-placed municipal officials say the city’s capital reserves – called the capital replacement reserves (CRR) – were depleted when it had to fork out the R261-million to cover the stadium costs which went unpaid by government.

After that, it was forced to take out its first bank loan as a metro, in the form of a R420-million 20-year loan last year.

The city is again taking out another major bank loan, but because of the depleted CRR, the loan has had to be reduced from R911-million – needed for the proposed 2010/11 budget of R2.87- billion – to R470-million.

The amount left in the CRR is only enough to cover the repayments on the combined R420-million and R470-million loans, the official revealed. This is also evident in the adopted 2010/11 budget of R2.18-billion, which has been cut back, partly because of the smaller available loan.

Baron referred to the projects on hold as “re-prioritised”.

“No projects have been delayed, but re-prioritised, to align the budget with the Integrated Develop Plan and national objectives,” he said.

DA caucus leader Leon de Villiers, who serves on the Budget and Treasury Committee, said he was concerned the “beautiful multipurpose stadium” had left ratepayers with “a huge financial burden”.

“Our ratepayers have now paid a total of R336-million, which depleted our CRR which would normally be used to fund our capital budget for infrastructure such as roads, stormwater, water and so on.

“This in turn meant that we had to raise a loan of R420-million to finance infrastructure development projects reflected in the 2008/09 capital budget.”

Of the stadium, he said: “My concern is that it will take a considerable time for (the stadium) to reach a break-even point. In the meantime, it remains a burden to our ratepayers.”

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